Previous Quarterly Editions
Expropriation Risk: 66 65 66 64 ▼Political Violence Risk:51 51 59 51 ▼Terrorism Risk:25 24 23 23 ►Exchange Transfer and Trade Sanction Risk: 64 64 63 63 ►Sovereign Default Risk:66 74 82 83 ►
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*Note: Protest intensity is calculated based on ACLED. Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of calculations, see the introductory essay.
Protest intensity in 2022 and Q1 2023* 2022 Q1 2023Cost of living : Low LowAll protest: Low Medium
Cost-of-living protest risk in 2023*Wage protest: Low Food/fuel policy protests: Medium
Angola’s economy has continued to recover from the impact of the COVID-19 pandemic since the last iteration of the Political Risk Index in P2 2022, supported in part by higher oil prices – which peaked at USD125 a barrel in 2022 – triggered by Russia’s invasion of Ukraine. Oil production also increased to 1.7 million barrels per day (bpd), overtaking Nigeria’s 1.13 million bpd, and making Angola Sub-Saharan Africa’s largest oil producer. Meanwhile, the non-oil sector also recorded strong growth.
Economic growth, estimated to be 2-3% of GDP in 2022, is forecast to reach 3.5% in 2023. Inflation fell to 13.8% in December, down from 19.8% in August, and is forecast to fall to single digits by 2024. Lower global food prices, a stronger kwanza exchange rate and lower interest rates in 2022 all helped to improve the economic outlook but there are mounting fears of sharp reversal in the outlook for food prices in 2023 because of the protracted conflict in Ukraine.
Nevertheless, the International Monetary Fund (IMF) is forecasting economic growth rates of 4% over the medium term, a welcome return to positive growth following a protracted six-year recession which saw the economy contract by 10%. President Joao Lourenco’s ruling People’s Movement for the Liberation of Angola (MPLA) government continues its support of growth in the non-oil sector to reduce the country’s excessive dependence on hydrocarbon exports.
Despite risks arising from falling oil prices – Brent crude fell to USD68 a barrel in March – oil-rich African countries such as Angola can expect to benefit from an economic boost as European countries fall over themselves to court African oil and gas exporters to compensate for the loss of oil and gas imports from Russia.
It is still too early to gauge how great a realignment might arise out of Russia’s invasion in Ukraine, but Claudio Descalzi, chief executive officer of Italian oil giant ENI, is already talking of a new north-south energy axis between Africa and Europe.
Angola is redoubling efforts to court international investment in the economy, in an effort to breathe new life into an ambitious privatization programme launched in 2019 but which was knocked off course by the COVID-19 pandemic. Consequently, expropriation of private sector assets, such as the still-to-be-explained seizure of China’s LLI International’s 19% stake in the Catoca diamond mine in 2022, are likely to be the exception.
Some 195 state-owned enterprises, mostly small to medium-sized firms and stand-alone factories, have been earmarked for privatization, 94 of which have now been sold, bringing in nearly USD2 billion for government coffers. But many of the larger outfits, such as mobile phone provider Unitel (still 25% owned by the Isabel dos Santos, daughter of the former late president), SGA (the company responsible for managing the country’s 18 airports, which has seen interest from potential buyers in Spain, France, and Germany), and Sonangol (the state-owned oil and gas company) remain on the books.
Sonangol, now Angola Oil and Gas, has been stripped of most of its non-core assets, which saw the sale of around 50 non-oil assets, but the sale of the ‘jewel in the crown’ of state assets keeps being postponed, and a proposed initial public offering now seems unlikely much before 2027.
Extreme poverty, high fertility rates, vast income disparities and a government with the narrowest electoral mandate since the country’s independence from Portugal in 1975, have heightened pressure on the MPLA to reach out to the disenchanted and impoverished sectors of society.
In one of the closest election contests in a generation, the MPLA beat the opposition National Union for the Total Independence of Angola (UNITA) party in legislative polls in 2022 by a mere 500,000 votes in a ballot that was widely seen as having been unfairly ‘fixed’. Most of the country’s 14 million voters stayed at home, leading to a mere 46% turnout nationally, with UNITA taking 62% of the vote in Luanda, traditionally the MPLA’s stronghold.
Much of the discontent in Angola arises from its glaring inequalities, and the ruling party’s failure to make much of an improvement in the quality of life of its citizens two decades since the end of the civil war. Roughly half of the population lives on USD1.90 a day or less, while some 66% of the population of 35 million are under 24 years of age and have no memory of the 22-year civil war between 1975 and 2002 in which 500,000 people lost their lives, and which left the country in ruins.
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Angola, a predominantly Christian country, has faced little threat from the kind of Islamic extremism that has afflicted West African countries. The country’s only home-grown terrorist group, the Front for the Liberation of the Enclave of Cabinda (FLEC), has not been active since 2010. However, the region voted overwhelmingly in favour of UNITA, which has greatly alarmed some of the senior leadership of the MPLA.
Angolan inflation has undergone a steady decline from 27% at the end of 2021 to 13.8% at the end of 2022 and fell further to 11.54% in February 2023. The inflation rate is expected to fall to single digits by 2024. This downward trajectory has been attributed to declines in global food prices (a trend that is, however, subject to reversals arising out of the fallout from the conflict in Ukraine) a stronger kwanza, and efforts by the Central Bank of Angola to tighten monetary policy.
With IMF approval, the government has pledged to further reduce fuel subsidies when conditions allow. This can be expected to put upward pressure on inflation and runs the risk of triggering street protests. However, with inflation at its lowest level since 2015, José de Lima Massano, the governor of Angola’s national bank, was able to announce a 100-basis-point reduction in benchmark interest rates to 17%, the second cut this year.
Angola’s debt-to-GDP ratio fell to 66% in 2022, despite higher-than-budgeted capital expenditure, helped by a stronger exchange rate. This further reduced the risk of a sovereign default. Nonetheless, the country remains heavily dependent on hydrocarbon exports and therefore also remains highly exposed to cyclical fluctuations in oil prices.
Angola earned USD33.7 billion from all exports in 2021, 84% of which came from hydrocarbons. Due to the government’s accumulated oil-backed loans, more than half of the country’s oil output went in debt servicing costs to China, which is Angola’s leading creditor. The World Bank has long said that Angola’s future rests in agriculture rather than hydrocarbons, but the transition is painfully slow.
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